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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Jurgis Bekepuris who wrote (30503)	4/1/2008 11:06:19 AM
From: Broken_Clock	Respond to of 78615

Resource markets are simply reflecting cheap credit.

To: Jurgis Bekepuris who wrote (30503)	4/1/2008 1:29:33 PM
From: Tapcon	Respond to of 78615

Not to belabor the point...but... The reason the ratio (debt/income)trend is important is that presumably there will be a reversion to the mean. One of several reasons for the reversion to take place is the imposition of tighter lending standards. The debt levels per household were unsustainable for individuals taking on ARMs, or even fixed rate mortgages if they were at their credit limit. They reckoned the economic cycle would never turn down. The rates and easy money had everything to do with the assumption of the debt loads and those rates and easy money were not sustainable. So when Tilson is pointing to the ratio trend and saying we still have a huge amount of debt out there that was written throughout 2006 and early 2007 at low ARMS rates, that's the argument that we are still in the early innings. I agree that the real question is whether the house values have reduced enough. In trying to assess the answer to that question, the question of whether the debt is affordable at the moment or whether the debt load is affordable over the long term is something to be considered. Seems probable that given the amount of pain out there now, it could take a while.